Freeport McMoran
One factor in copper's recent decline has been the Chinese economy which continues to pursue a policy of zero-COVID and stringent lockdowns. This has resulted in the economy running below capacity and lower demand for all types of commodities. In the longer-term, copper demand should remain strong due to the increasing adoption of electric vehicles (EV) and the electrification of the economy.
Overall, Freeport McMoran shares are down 25% YTD and are off by 40% from last year's highs. Shares are quite cheap given their P/E of 9 and 2% dividend yield. However, the stock's near-term moves will be determined by copper prices where the outlook looks uncertain given the increasing odds of a recession.
Inside the Numbers
In Q3, Freeport McMoran reported $0.28 per share in earnings which was above analysts' expectations of $0.26 per share. This was a sharp decline from $0.94 per share in earnings in last year's Q3.
The major factor in Freeport's weakness is that copper prices are down by about 30% due to a weakness in Chinese demand. However, the company is quite confident that demand should continue rising given trends for increased renewable energy adoption and no indication of deterioration in customer orders.
The company said that physical markets continue to be tight despite the pessimism coming from financial markets. The company did not rising cost pressures which are negatively impacting margins. Another bright spot is that copper production was up by 7% to 1.06 billion recoverable pounds while the average selling price of copper per pound was down 16%.